M
marmalade
Member
In the solutions, it mentions about there being two assumptions for investment return on EV basis: one to project assets and a risk disc rate to discount future profits. However it says that there is no equivalent parameter to the risk discount rate for a reserving basis. I don't understand this. Is it because reserving basis uses prudent assumptions and so no future profit expected?
I think I'm confused! What discount rate is used to discount the liability cashflows in order to determine the PV?
Also why are assets not taken at market value? Why are they projected? Surely if they are projected then they will also have to be discounted to get todays value?
Thanks in advance.
I think I'm confused! What discount rate is used to discount the liability cashflows in order to determine the PV?
Also why are assets not taken at market value? Why are they projected? Surely if they are projected then they will also have to be discounted to get todays value?
Thanks in advance.